News (#03 March 2017)


Capital Markets

MoodyТs pays penalty for false ratings

The US authorities imposed penalties on the international rating agency MoodyТs to the sum of USD 864 million for false securities ratings in the US real estate market before the financial crisis of 2008. The US Department of Justice accused MoodyТs of providing unreasonably high ratings for high-risk securities, which were partly supported by distressed mortgage loans. In this way customers were prompted to buy securities having no idea they were highly risky. Precisely such securities were one of the ultimate causes of US real estate market collapse and of the financial crisis of 2008, according to the US Department of Justice.

English Court approved Metinvest obligations restructuring

The High Court of England and Wales (High Court of Justice Chancery Division of England and Wales) approved the restructuring of obligations of the international vertically integrated mining and steel group Metinvest to its Eurobonds holders and creditor banks.

According to a statement by Metinvest B.V. group holding company (Netherlands), it has already notified its Eurobonds holders of entry into force of all prior agreements regarding the terms of restructuring.

At the end of December 2016 Metinvest addressed its Eurobonds holders and creditor banks that provided pre-export financing with a proposal to convert all bonds into a single Eurobond issue, and all credit on pre-export financing Ц into one credit line.

The company, amongst other things, proposes to combine all three Eurobond issues: maturing in 2016, 2017 and 2018, into a single Eurobonds issue with maturity period till 31 December 2021, and four syndicated credit lines on pre-export financing Ц into one credit line.

As of 30 November 2016, the total sum of debt owed to creditors on these instruments amounted to USD 2.29 billion.

During its session on 17 January, the High Court of England allowed Metinvest B.V. to convene separate meetings of bondholders and creditors on pre-export financing to discuss restructuring obligations due to them.


Bitcoin acknowledged as official means of payment in Japan

The Japanese authorities have approved use of Bitcoins as a means of payment starting from April 2017. To get a license a fee of USD 300,000 must be paid, which is non-refundable even if the license is not issued. Also a company must have at least USD 100,000 on its account in reserve currency. The authorities deliberately set high rates so as to restrict access to the legal Bitcoin market for small companies and private persons.

Companies will also fulfill other requirements in order to prove that they shall not use the cryptocurrency for criminal purposes. In particular, they will have to undergo regular inspections by the tax authorities.

Such tough regulations have been put into place due to the fact that in 2014 owners of cryptocurrency in Japan became victims of serious fraud. Bitcoin exchanger Mt. Gox suddenly stopped its operations, resulting in many users losing large sums of money. They could not seek compensation in court, as Bitcoin was not acknowledged as tangible property. In the same year Japanese banks and other companies were prohibited from conducting transactions in Bitcoin.

Last year, Japanese insurance company Mitsui Sumitomo Insurance introduced a package of services that covers losses of Bitcoin exchangers. However, regular users still were not able to count on their investments in the cryptocurrency being protected. At the same time, Bitcoin is widely used in the country, not only for purchase of goods in online shops, but also for utility services payments. In Japan, about 5,000 businesses and online shops accept payment in Bitcoin and the turnover of Bitcoin in the country has increased in recent months. Between April and December 2016 the number of digital currency owners increased by 62,000 people.


AMCU fined Kyivenergo

The temporary administrative board of the Antimonopoly Committee of Ukraine has determined that PJSC Kyivenergo violated legislation on protection of economic competition in the form of abuse of monopolistic position on the electricity transmission market.

PJSC Kyivenergo limited SUR (Suppliers at unregulated rates) in their selection of potential consumers, and deprived them of the possibility to carry out economic activities in Kiev, particularly by putting forward unreasonable demands in a draft agreement on electric power distribution. For this violation PJSC Kyivenergo was fined UAH 17.958 million.

Trade Policy

Ukraine filed suit against Russia to WTO on transit restrictions

On 8 February Ukraine sent to the World Trade Organization a request to form an Expert Group within the framework of the case on numerous limitations of transit from the territory of Ukraine through the territory of the Russian Federation to third countries Ц Kazakhstan and Kyrgyzstan (DS512 УRussia Ц transit traffic activitiesФ).

Since application of provisions on advanced and comprehensive free trade area with the European Union by Ukraine, the Russian Federation imposed limitations on transit traffic by road and railways to Kazakhstan from 1 January† 2016, and from 1 July 2016 Ч to Kyrgyzstan. Experts estimated that about 79% of export supplies from Ukraine to Kazakhstan and 95% to Kyrgyzstan suffered from limitations and partial restrictions on the part of the Russian Federation.

Within the context of work to counter aggression of the Russian Federation in trading environment and to protect the interests of Ukraine and Ukrainian exporters, last year the Ministry of Economic Development and Trade began the process of dispute settlement within the framework of the WTO. Since at the first stage the Russian Federation was not ready for a settlement and did not take measures to remove limitations as to the transit, the Ukrainian party continued consideration of the case in accordance with the established procedure, and sent a request to WTO to form the Expert Group so as to start the next stage of dispute consideration (substantive consideration of the case).

As was explained by the Deputy Minister of the Ministry of Economic Development and Trade and the Trade Representative of Ukraine, Nataliya Mykolska, since application of restrictive measures under appeal, the export of goods from Ukraine to countries of Central/Eastern Asia in 2016 decreased by 38.3% as compared to 2015. In general, losses of export of goods to Kazakhstan and Kyrgyzstan are estimated to run to more than USD 400 million.

Materials for preparing the next lawsuit, which will cover numerous restrictions and limitations on the export of Ukrainian goods to the Russian Federation, are currently being collected.

Canadian Parliament ratified agreement on free trade area with Ukraine

The Lower House of the Federal Parliament of Canada has by a majority of votes supported ratification of the Free Trade Agreement with Ukraine in the third and final reading.

The Agreement will now be sent to the Senate, the Upper House of Parliament, to the Governor-General for signing, which is the final stage for the document to come into force.

A reminder that the Free Trade Agreement between Canada and Ukraine was signed on 11 July 2016.

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